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EMPLOYMENT OF DEBTOR AND PROFESSIONAL PERSONS
(a) EMPLOYMENT OF DEBTOR’S PRINCIPALS OR INSIDERS IN CHAPTER 11 CASES
No compensation or other remuneration shall be paid from the assets of the estate to a debtor’s owners, partners, officers, directors, shareholders, and relatives of insiders as defined by 11 U.S.C. § 101(31), from the time of the filing of the petition until the confirmation of a plan unless the debtor serves a “Notice of Insider Compensation.” The debtor must serve the notice on the United States trustee, the creditors’ committee or the 20 largest creditors if no committee has been appointed, and any secured creditors that claim an interest in cash collateral and provide proof of service to the United States trustee. If no objection is received within 15 days, such compensation may be paid from the estate. If an objection is received within the 15-day notice period, the debtor shall set the matter for hearing and serve a Notice of Hearing, indicating the date and time of the hearing, upon the objecting party and the United States trustee on not less than 20 days notice. The original Notice of Hearing, along with true and correct copies of the Notice of Insider Compensation and the objection, shall be filed with the court. If the proposal is to increase the amount of compensation or other remuneration, no such increase will be effective until 30 days after service of the notice. The notice provision and objection procedure as set forth above also applies to increasing insider compensation requests.
(b) EMPLOYMENT OF PROFESSIONAL PERSONS
- (1)
- Applications for Employment. An application seeking approval of employment of a professional person pursuant to 11 U.S.C. §§ 327, 1103(a), or 1114 must comply with the requirements of F.R.B.P. 2014 and be filed with the court. Such application must be accompanied by a declaration of the person to be employed establishing disinterestedness or disclosing the nature of any interest held by such person. The United States trustee must be served with a copy of the application and supporting declaration not later than the day it is filed with the court. No hearing shall be required unless requested by the United States trustee, a party in interest, or otherwise ordered by the court. A timely application for employment is a prerequisite to compensation from the estate; therefore, an application for the employment of counsel for a debtor in possession should be filed as promptly as possible after the commencement of the case and an application for employment of any other professional person should be filed as promptly as possible after such person has been engaged. Substitution of attorneys must also comply with Local Bankruptcy Rule 2090-1(f). If a chapter 7 trustee seeks to retain himself or herself, or his or her own firm as a professional, the application must specify the reasons therefor in compliance with 11 U.S.C. § 327(d).
- (2)
- Notice of Application.
- (A)
- Notice of an application by the debtor (if such application is required), debtor in possession, or trustee, to retain a professional person must be filed and served on the United States trustee, the official committee of unsecured creditors, its counsel, the debtor (if a trustee has been appointed), and all parties who have requested special notice. If no creditor’s committee has been formed, notice shall be given to the 20 largest unsecured creditors.
- (B)
- Notice of an application by a committee to retain a professional person must be filed and served on the United States trustee, debtor or debtor in possession and the trustee (if appointed), and their counsel.
- (C)
- The notice must be filed and served not later than the day the application is filed with the court.
- (3)
- Content of Notice. The notice shall:
- (A)
- State the identity of the professional and the purpose and scope for which it is being employed.
- (B)
- Describe the arrangements for compensation, including but not limited to, the hourly rate of each professional to render services, source of the fees, the source and amount of any retainer, the date on which it was paid, and any provision regarding replenishment thereof.
- (C)
- Provide a name, address and telephone number of the person who will provide a copy of the application upon request.
- (D)
- Advise the recipient that any response and request for hearing, in the form required by Local Bankruptcy Rule 9013-1(a)(7), must be filed and served on the applicant (and counsel, if any) and the United States trustee not later than 15 days from the date of service of the notice.
- (4)
- No Response and Request for Hearing. If the response period expires without the filing of any response and request for hearing, the applicant must promptly lodge a proposed order. At the same time as the proposed order is lodged (and preferably rubber-banded or clipped to the order), the applicant must also file a declaration attesting that no response and request for hearing was served upon the applicant, to which declaration shall be appended (as exhibits) copies of the application, notice and proof of service of the notice. The proposed order and declaration need only be served on the United States trustee. No other service before filing and lodging is required. These papers shall be accompanied by the necessary copies of the notice of entry for the order, together with the requisite addressed, stamped envelopes. The notices of entry shall provide for service on the debtor, any trustee, any committee appointed in the case, the United States trustee, counsel for any of the foregoing, and any parties that had requested special notice.
- (5)
- Response and Request for Hearing Filed. If a timely response and request for hearing is filed and served, the applicant, within 20 days from the date of service of a response and request for hearing, must schedule and give not less than 11 days notice of a hearing to those responding and to the United States trustee. If the applicant fails to obtain a hearing date, the court may deny the application without prejudice, without further notice or hearing.
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